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Don’t look now but Apple Pay is about to take off.
Apple’s (NASDAQ: AAPL) mobile payments service, Apple Pay, seems to be taking the U.S. by storm. Soon, the service will launch in Canada and it is only a matter of time before the convenient and secure payment service expands to other foreign markets. Apple CEO Tim Cook went so far as to say that “2015 will be the year of Apple Pay.”
While we still don’t have any transaction data such as total payments processed, average transaction value or how much Apple makes from Apple Pay, I learned four very important things about the payment service during Apple’s earnings report conference call on Monday and in recent reports.
Behind these seemingly minor announcements are a big signal that Apple Pay is about to drive a huge shift in the market for payment processing . . . and is finally igniting the mobile payments revolution we’ve heard about for a couple years now. Here are the critical developments:
1. Best Buy will adopt Apple Pay.
Apple announced on its earnings report conference call that big box electronics retailer Best Buy (NYSE: BBY) will adopt Apple Pay later this year. Best Buy’s mobile app and online store already offer Apple Pay as a payment option. Though the analyst and financial media communities are focusing on Apple’s impressive iPhone sales figures, the Best Buy deal is hugely important.
Why?
Best Buy is part of a coalition of major retailers known as Merchant Customer Exchange (MCX). Recognizing the approaching tsunami of the mobile payment industry, this group has been hard at work on its own mobile payment solution, CurrentC. Soon after Apple Pay came out, MCX companies CVS Health (NYSE: CVS) and Rite Aid (NYSE: RAD) decided to stop using it in their stores, opting instead for MCX’s CurrentC. Many other MCX companies – such as Wal-Mart Stores (NYSE: WMT) – never adopted Apple Pay in the first place.
Now Best Buy has rolled over and adopted Apple Pay. That is a huge vote of confidence in Apple Pay and a sharp setback for CurrentC. This probably explains why MCX’s CEO was replaced the day after Apple announced Best Buy’s Apple Pay adoption.
2. Apple Pay is entering the health-care payments industry.
Health-care payments service Instamed announced in April that it would begin accepting payments via Apple Pay, the first such application for health-care payments. While users will soon be able to pay co-pays through Apple Pay, it won’t be long before consumers can pay all of their medical bills through Apple Pay.
According to the Center for Medicare and Medicaid Services, the U.S. is expected to spend more than $3 trillion on health care this year. If Apple Pay is able to tap into processing even a sliver of these payments, it will be a huge boost for Apple Pay.
3. Apple Pay will launch in Canada this fall.
While initially only available in the U.S., it was only a matter of time before Apple Pay expanded beyond the borders of the United States. Apple Pay’s first foreign market will be Canada; the service will launch there later this year.
While Canada is certainly a big market, it is nothing compared to markets like India, China, Brazil. I consider Canada to be a dry run for Apple Pay before it is launched in other countries. And considering Apple Pay’s security advantages, I think the service will be wildly popular.
3. With Discover, every major credit card is on board with Apple Pay.
With initial adoption by Visa (NYSE: V), MasterCard (NYSE: MA) and American Express (NYSE: AXP), the only holdout was Discover Financial Services (NYSE: DFS). That will soon change. Discover announced this week that its services will be compatible with Apple Pay beginning this fall.
Though it isn’t entirely clear why Discover was holding out, its adoption of Apple Pay is as significant Best Buy’s move. It signals to me that retailers and payment processors can read the writing on the wall. They know they need to join the Apple Pay revolution if they want to remain competitive.
The coming mobile payments revolution we’ve heard so much about sure seems to be shaping up to be a Apple Pay revolution.
DISCLOSURE: I personally own shares of Apple and Wal-Mart Stores.
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